Industry profits “peaking” says IATA

GENEVA: October 12, 2016. IATA's latest sampling of airline fiscal health suggests while profit margins remain high in historical terms, "operating conditions are becoming more challenging and the industry profitability cycle is showing signs of peaking".

By the end of Q2 2016, IATA said overall airline capital expenditure as a share of revenue had risen from 13.7 percent to 21 percent compared to the same period in 2015 - particularly in Europe. As a result, free cash flow dropped from 5.8 percent to 4.9 percent year-on-year.

The notable exception was in the Middle East/Africa region, where a drop in capital expenditure from 8.5 percent to 6.2 percent at the end of Q2 saw a corresponding rise in free cash flow from 14.3 percent to 21.1 percent of revenue, enabling the carriers to return cash to investors, pay down debt - or spend it.

In the case of Emirates Airline, some of the the money is being spent on new cool chain cargo facilities for perishables and opening new routes – despite a "stiff headwind" according to IATA. On October 11, the carrier began a weekly B777F service linking Dubai with Oslo to meet global demand for Norwegian seafood including salmon, cod, trout and crab. Transit time between the airline's two hubs in Dubai is less than five hours for onward delivery via the airline's passenger network to 150 destinations in 82 countries.

One of them will be Ft. Lauderdale when Emirates begins service to the South Florida gateway on December 15 with a B777-200 and 15 tons of cargo capacity: "We launched our non-stop Dubai-Orlando service roughly a year ago and its strong performance encouraged us to select Fort Lauderdale as our 11th U.S. destination," declared Emirates president Tim Clarke.

Meanwhile, another Gulf airline with free cash flow – Qatar Airways – has also arrived in Scandinavia with the start of a daily A320 service between Doha and Helsinki. The new destination adds to existing services linking Norway, Sweden and Denmark with Qatar.

Arriving on the inaugural A350 flight (right), airline CEO Akbar Al Baker commented: "Launching our new route to Helsinki is a proud moment for the airline, completing our strategy of serving the needs of Europe's Nordic capitals and facilitating connections for businesses, cultures and families between Finns and people throughout the world."

IATA concluded its latest review of airline financial health by saying that while conditions for airfreight have improved since the beginning of the year, the weakness in world trade has resulted in "low loads" and continued pressure on yields and revenue.